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MODULE D
Important & Scoring Module

COMMERCIAL & OTHER LAWS WITH

REFERENCE TO BANKING OPERATIONS
1. Indian Contract Act, 1872

2. The Sales of Goods Act, 1930

3. The Indian Partnership Act, 1930

4. The Company Act, 2013

5. Limited Liability Partnership Act, 2008

6. Transfer of Property Act, 1882

7. The Right to Information Act, 2005

8. Information Technology Act, 2000

9. PREVENTION OF CORRUPTION ACT, 1988

1. INDIAN CONTRACT ACT,
1872
Formula of Contract & its Key Components

Offer +Acceptance

Promise (Agreement)

Law Enforceability

(Consideration)

CONTRACT
SECTION 10
CONTRACT & BANKING

A. Special Relationship

1. Debtor and Creditor

2. Creditor and Debtor

B. Special Relationship

1. Trustee and Beneficiary (Bank as a Trustee and Customer as a Beneficiary)

2. Bailee and Bailor (Bank-Bailee and Customer- Bailor)
3. Lessor and Lessee (Bank- Lessor and Customer- Lessee)
4. Agent and Principal (Bank- Agent and Customer- Principal)
5. Indemnity holder and Indemnifier (Bank-Indemnity holder and Customer-
Indemnifier)
6. Hypothecator and Hypothecatee (Bank- Hypothecatee and Customer- Hypothecator)
7. Pledger and Pledgee (Bank- Pledgee or Pawnee and Customer- Pledger or Pawnor)
8. Mortgagor and Mortgagee (Bank- Mortgagee and Customer- Mortgagor)
9. As a Custodian
10. As a Guarantor
11. Advisor and Client (Bank- Advisor and Customer- client)
CONTRACT OF INDEMNITY

SECTION 124

 A CONTRACT OF INDEMNITY basically involves one party promising

the other party to make good its losses. These losses may arise either
due to the conduct of the promisor himself or conduct by any other
person

 There are generally two parties in indemnity contracts. The person

who promises to indemnify for a loss is the INDEMNIFIER.

 On the other hand, the person whose losses the indemnifier promises
to make good is the INDEMNIFIED. We can also refer to the
Indemnified party as the INDEMNITY HOLDER.

SECTION 125- Rights of Indemnity Holder

CONTRACT OF GAURANTEE

Section 126 of the Indian contract act defines a CONTRACT OF

GUARANTEE as a contract to perform the promise or discharge the
liability of the defaulting party in case he fails to fulfill his promise

Principal Debtor – The one who borrows or is liable to pay and on whose
default the guarantee is given

Creditor – The party who has given something of value to borrow and
stands to receive the payment for such a thing and to whom the
guarantee is given

Surety/Guarantor – The person who gives the guarantee to pay in case

of default of the principal debtor
Rights against the Principal Debtor

1) The right of surety on payment of debt or the Right of subrogation

2) The right of Indemnity

Rights against the Creditor

1) Right to securities given by the principal debtor

2) Right to set off

Rights against the Co-sureties

1) Release of one co-surety does not discharge others
2) Co-sureties to contribute equally
3) Liability of co-sureties bound in different sums
CONTRACT OF GAURANTEE

(a) Financial Guarantee –These are guarantees issued by banks on

behalf of the customers, in lieu of the customer’s requirement to
deposit a cash security or earnest money, is called Financial guarantee

(b) Performance Guarantee - This type of guarantees are meant for

performance of contracts entered into by the customers

(c) Deferred Payment Guarantee- This type of guarantee is issued when

the bank's customer purchases some machine etc. on deferred
payment basis and that payment is guaranteed by the bank
CONTRACT OF BAILMENT

The word ‘bailment’, is derived from ‘bailler’, a french

word which means ‘to deliver’. Bailment has been
defined under the Section 148 of the Indian Contract
Act, 1872, according to which

Bailment involves the delivery of goods from one

person to another for a specific purpose and upon a
contract, when the purpose is fulfilled, the good has
to be returned or dealt with on the direction of the
person who has delivered the goods.
CONTRACT OF PLEDGE

• Pledge is a kind of bailment. Pledge is also known as

Pawn. It is defined under Section 172 of the Indian
Contract Act, 1872. By pledge, mean bailment of goods
as a security for the repayment of debt or loan
advanced or performance of an obligation or promise.

• The person who pledges the goods as security is

known as Pledger or Pawnor and the person in whose
favor the goods are pledged is known as Pledgee or
Pawnee
CONTRACT OF AGENCY

DEFINITION
The term ‘agent’ and ‘principal’ has been defined in Section 182 0f the
Indian Contract Act 1872. In terms of Section 182 “An ‘agent’ is a person
employed to do any act for another, or to represent another in dealings
with third persons. The person for whom such act is done, or who is so
represented, is called the “principal”. Thus the main utility of the agent is
to act as a connecting link and bring the principal into a binding contractual
relationships with third persons.

CONTRACT OF AGENCY
The general principle followed by the courts in such cases is that a contract
of agency is created when right is given to a person to represent the
principal in dealing with third persons or to do something for the principal.
TYPES OF AGENT

1. Special Agent- Agent appointed to do a singular specific act.

2. General Agent- Agent appointed to do all acts relating to a specific
job.
3. Sub-Agent-An agent appointed by an agent.
4. Co-Agent- Agents together appointed to do an act jointly.
5. Factor- An agent who is remunerated by a commission (one who
looks like the apparent owner of the things concerned
6. Broker- An agent whose job is to create a contractual relationship
between two parties.
7. Auctioneer- An agent who acts a seller for the Principal in an auction.
8. Commission Agent- An appointed to buy and sell goods (make the
best purchase) for his Principal
9. Del Credere- An agent who acts as a salesperson, broker and guarantor
for the Principal. He guarantees the credit extended to the buyer. (Extra
Commission)
2. SALES OF GOODS ACT, 1930
DIFFERENCE
 CONDITION AND WARRANTIES

A stipulation is a condition or warranty depends upon the contract.

Condition - It is a stipulation which essential to the main purpose of the

contract. If it is breached, a party to the contract has option to cancel
the contract.

Ex-TV is of 3D quality.

Warranty - It is a stipulation which is collateral to main purpose of the

contract. Its breach gives rise to claim for damages only. Goods cannot
be rejected and contract cannot be cancelled.

Ex-Mobile battery dead within 1 month

Caveat Emptor’ is a Latin expression which means “let the buyer

beware”.
 Goods are in
Right to Lien possession of seller

Right of
Against the Goods are in transit
stoppage in
Goods
transit
Goods are in
perishable nature
Right of Resale & other goods
Right of Unpaid
Seller

Suit for Price Property has passed to

the buyer (Refuse to pay
Against the price)

Buyer Suit for damages  Non Acceptance

 For Breach
for non  For Interest
acceptance
3. INDIAN PARTNERSHIP
ACT, 1932
Meaning
According to Section 4 of the Partnership Act,1932

“Partnership is the relation between persons who have agreed to share the
profits of a business carried on by all or any one of them acting for all”.

Kinds of Partnerships

 Partnership at will
 Partnership for a fixed period
 Particular Partnership

Registration of Partnership Firm

In India, it is not compulsory to register the partnership and no penalty is
being imposed for non-registration but if we talk about English law it is
compulsory to register partnership firm and if it is not registered then the
penalty is imposed.
HOLDING OUT

Sec. 28 of the Act states that anyone who, by words spoken or written or by
conduct, represents himself for knowingly permits himself to be represented to
be a partner in a firm is as liable as a partner in that firm to anyone who has on
the faith of any such representation given credit to the firm whether the person
representing himself or represented to be a partner does or does not know that
the representation has reached the person so giving credit. This is known as
doctrine of holding out.

LEGAL POSITION AFTER THE MINOR ATTAINS MAJORITY

Section 30(5) of the Act stipulates that at any time within six months of his
attaining majority, or of his obtaining knowledge that he had been admitted to
the benefits of partnership (whichever date is later) the minor partner who
has attained majority may give public notice informing whether he has
elected to become a partner or not. This notice determines his position as
regards the firm.
However, if he fails to give such notice, he shall become a partner in the firm on
the expiry of the said six months.
Dissolution of Firm
4. The Company Act,
2013
 FEATURES OF COMPANY

(a) Registration

(b) Artificial Legal Person

(c) Independent corporate personality

(d) Limited liability

(e) Perpetual succession

(f) Separate property

(g) Transfer of shares

(h) Common Seal

 PARTNERSHIP FIRM COMPANY
Definition
Partnership Firm is a mutual agreement between two or more Company is an association of persons with a common objective of
persons to run the business and share profit and loss mutually. providing goods and services to customers.
Applicable Act
Indian Partnership Act, 1932 Indian Companies Act, 2013
Minimum Number of Members Required
2 members for a partnership firm 7 for public limited, 2 for Private Limited,
Maximum Number of Persons allowed
50 members Maximum 200 members for a Private Limited, unlimited members for
a Public Limited
Essential Documents Required
Partnership Deed required for the creation of a partnership firm Memorandum of Association and article of association is mandatory
for incorporating a company
Capital Requirement
No such amount required No such requirement
Requirement of Audit
No audit required Mandatory audit is required every year
Transferability of Shares
Consent required from all partners before transferring Can be transferred
Is it considered a Legal Entity?
Not considered It is considered a legal entity
Basis of Difference Public Company Private Company
A Public company is the one that is registered in the A private company is the one that has the minimum
Meaning share market of the country to issue shares for the paid-up share capital as prescribed in the Articles of
public to subscribe to them. Association.
Number of Owner/ It has a minimum of 7 and no maximum limit on the It has a minimum of 2 and a maximum of
Members number of owners/ members. 200 owners/ members.

As per the terms and conditions decided in the

Owners/Members are free to transfer their share to
Transfer of Share article of association. many types of restrictions are
the other person in the market.
imposed by the AOA.

The prospectus must be issued to invite the public to

Share Prospectus The prospectus does not need to be issued.
subscribe to shares of the company.

The word ‘Limited’ is used as part of the name of the The word ‘Private Limited’ is used as part of the
Name of Company
company. name of the company.

Possible to raise funds by issuing shares of the

Funds Raising For public companies, it is very easy to raise funds by
company with the mutual consent of all
issuing shares to the public in the share market.
members of the company.

Who can Subscribe The public can easily subscribe to the share of the The public can’t subscribe to the share of the
the Share Capital company. company.
Difference Between MOA and
MOA AOA
AOA

The purpose of the Memorandum

It defines the rules and regulations
of Association is to define the
that govern the internal
The Purpose objectives of a company and
management of the company for
the conditions for its
achieving its objectives.
incorporation.

It defines the relationship between

It defines the relationship of the
the members of the company
Parties Concerned company with the external
amongst themselves and with the
parties
company

MOA can be altered only under AOA can be altered by passing a

Alteration
special conditions special resolution

MOA must contain all the six

clauses of the Memorandum of AOA can be framed as per the
Contents
Association as specified under the discretion of the company
companies act
 Any acts beyond the scope of Acts that are ultra vires the
the MOA are considered AOA company but are not
ultra-vires and void. Such ultra-vires MOA can be
Ratification
acts cannot be ratified by ratified by a special
the unanimous votes of the resolution of the
shareholders. shareholders.

It is mandatory to register
The filing of the AOA is not
the MOA with the registrar of
Registration mandatory. The company
companies at the time of the
may or may not file it.
company registration

AOA is subsidiary to both the

MOA is subsidiary to the
Subsidiary Companies Act as well as
Companies Act
the MOA

Memorandum of Association Articles of Association

Section Under the meaning has been stated meaning has been stated
Companies Act under Sec 2(56) of the under Sec 2(5) of the
Companies Act Companies Act
 DOCTRINE OF ULTRA VIRES

 The Doctrine of Ultra Vires is a fundamental rule of Company Law.

It states that the objects of a company, as specified in its
Memorandum of Association, can be departed from only to the
extent permitted by the Act.

 When a company exercises its powers to promote and/or realize

any of its objectives stated in the memorandum of association, it is
intra vires (i.e. within the powers of) the company. However,
any other act of the company which is outside the scope of the
objects clause of the memorandum of association is known as
ultra vires (i.e. beyond the powers of) the company.

 The company cannot sue on an ultra vires transaction. Further, it

cannot be sued too.
 DOCTRINE OF CONSTRUCTIVE NOTICE

 The memorandum and articles of association of a company when registered

with Registrar of Companies, become public documents, and they are
available for inspection to any person, on the payment of a nominal fees.

 It is, therefore, the duty of every person dealing with a company to inspect its
documents and make sure that his contract is in conformity with their
provisions but whether a person reads them or not, it will be presumed
that he knows the contents of the documents. This kind of presumed/implied
notice is called constructive notice
 DOCTRINE OF INDOOR MANAGEMENT

 A person who deals with the company is deemed to have read and understood
the registered public documents such as the memorandum of association and
articles of association, etc., to see that his contract with the company is not
inconsistent with them.

But he is not bound to inquire into the regularity of the company’s internal
functioning or the internal management of the company. Hence, if his contract is
consistent with the public documents, the company is bound by such contract. He
will not be affected by any irregularity in the internal management of the company.
This is known as the doctrine of indoor management.

 Doctrine of indoor management is an exception to rule of constructive

notice.
 MEMBER

1. The persons who have subscribed to the Memorandum of a

company.

2. Every other person who has agreed in writing to become a member

of the company and whose name has been entered in the Register of
Members.

3. Every person holding share of a company and whose names are

recorded as beneficial owner in the depository records are
considered as members of the concerned company.

A depository is a facility or institution, such as a building, office, or warehouse, where something is

deposited for storage or safeguarding. Depositories may be organizations, banks, or institutions that
hold securities and assist in the trading of securities.
 RIGHTS OF THE MEMBERS

1. Statutory Rights: These are the rights conferred upon the members by
the Companies Act. These rights cannot be taken away by the Articles of
Association or Memorandum of Association. Some of the important statutory
rights are given below:-

a. Right to receive notice of meetings, attend, to take part in the discussion

and vote at the meetings.
b. Right to transfer the shares [in case of public companies].
c. Right to receive copies of the Annual Accounts of the company.
d. Right to inspect the documents of the company such as register of
members, annual returns, etc.
e. right to participate in appointments of directors and auditors in the
Annual General Meetings.
f. Rights to apply to the Government for ordering an investigation into
the affairs of the company.
g. Right to apply to the Court for winding up of the company.
h. Right to apply to the National Company Law Tribunal for relief in
case of oppression and mismanagement under Secs. 397 and 398.

2. Documentary Rights: In addition to the statutory rights, there are

certain rights that can be conferred upon the shareholders by the
documents like the Memorandum and the Articles of Association.

3. Legal Rights:
 To be registered as a member in the company’s register of members
 No personal liability of a company’s debt
 To receive dividends
 To participate in the distribution of assets in case of liquidation of the
company.
 PROSPECTUS
Prospectus means a document by which a company solicits funds from the
public for its capital either by way of securities.
According to Section 2(70) of the Companies Act, 2013 a prospectus is any law
related document outlining the financial securities for the sale to the investors
of the corporate which also includes any circular, notice , ads or document
which acts as an invite to offers from the general public. And these invitations
to offers must be for the purchase of any securities of a company.
It is a legal document for the public and investors to buy and have the details
of the features, prospects and the declaration of a financial product.

Example:-
 In an IPO (Initial Public Offering ), the prospectus tells potential
shareholders about the company’s plans and business model.
 The prospectus for the Electronic Fund Transfer customers informs about the
history, portfolio, fund’s goal and various financial details.
 Types of Prospectus
Deemed Prospectus
Section 25(1) of the Companies Act, 2013 defines the Deemed Prospectus. Deemed
prospectus is a document from which the investors are made an offer when the company
allows or agrees to allot securities of the company. Any document offering sale of
securities to the customers is a prospectus by the implication of law.
Red Herring Prospectus
All the information regarding the price of the securities offered and the number of securities
to be issued isn’t defined within the red herring prospectus. According to the Companies
Act, the prospectus must be issued to the registrar a minimum of 3 days before the offer and
also the subscription list opens by the company.
Shelf Prospectus
Section 31 of the Companies Act, 2013 defines the shelf prospectus. When a company
offers 1 or more than one securities to the public or the customers then the shelf
prospectus is issued. The validity period of the prospectus should not be more than a year
and from the commencement of the first offer made its validity period starts. No prospectus
is issued on the further offers.
Abridged Prospectus
It is a memorandum providing all the data given by the SEBI. It gives all the data to the
investors for making further decisions. An organization must issue an abridged prospectus
 NUMBER OF DIRECTOR

 Minimum number of Director in a Public Company -3

 Minimum number of Director in a Private Company -2
 Minimum number of Director in a One Person Company -1

 Maximum number of Director in a company

15 Directors & may appoint more than 15 Directors after passing a special
resolution in a general meeting of Shareholder, shall have at least one-woman
director

Every company shall have at least one director who has stayed in India for a total
period of not less than one hundred and eighty-two days in the previous calendar year.
Every listed public company shall have at least one-third of the total number of
directors as independent directors and the Central Government may prescribe the
minimum number of independent directors in case of any class or classes of public
companies.
QUALIFICATION SHARES
A director is required to hold certain shares as qualification shares if such
requirement is there in the articles of association of the company. This
requirement is not applicable to a private company, unless it is a subsidiary of a
public company.

There are certain disqualifications under which a person shall not be capable
of being appointed director of a company; e.g., he has been found to be of
unsound mind by a Court or he is an undischarged insolvent or he has been
convicted by a Court of any offence involving moral turpitude and sentenced in
respect thereof to imprisonment, he has not paid the call money on his shares.

MAXIMUM NUMBER OF DIRECTORSHIPS

No person, after the commencement of this Act, shall hold office as a director,
including any alternate directorship, in more than twenty companies at the
same time. Provided that the maximum number of public companies in
which a person can be appointed as a director shall not exceed ten.
The members of a company may, by special resolution, specify any lesser
number of companies in which a director of the company may act as directors.
 Types of Winding
Up

Compulsory Winding Up or
Winding Up by NCLT
Voluntary Winding Up
(National Company Law
Tribunal)
5. Right to Information
Act, 2005
‘Information’ means any material in any form, including records,
documents, memos, e-mails, opinions, advices, press releases, circulars,
orders, logbooks, contracts, reports, papers, samples, models, data
material held in any electronic form and information relating to any private
body which can be accessed by a public authority under any law for the
time being in force.

‘Right to information’ has been defined in an inclusive manner. It means

the right to information accessible under this Act which is held by or under
the control of any public authority and includes the right to:
(i) inspection of work, documents, records;
(ii) taking notes, extracts or certified copies of documents or records;
(iii) taking certified samples of material;
(iv) Obtaining information in the form of diskettes, floppies, tapes, video
cassettes or in any other electronic mode or through printouts where such
information is stored in computers or in other device.
PUBLIC AUTHORITY [Section 2(h)]

Section 2(h) defines “public authority”. Public authority is an authority

or body or institution of self-government which is directly or
indirectly related to the government. Such authority may be
related to the government in any of the following ways:

[Link] is established or constituted by or under the Constitution

[Link] is created by an Act of Parliament
[Link] is created by an Act of State Legislature
[Link] is established or constituted by a notification issued or order made
by the appropriate government

The public authority also includes:

[Link] body owned, controlled, or substantially financed;
[Link] NGO substantially financed,
directly or indirectly by funds provided by the appropriate government.
PROCEDURE OF OBTAINING INFORMATION

1. PIO shall deal with requests from persons seeking information and
where the request cannot be made in writing, to render reasonable
assistance to the person to reduce the same in writing.

2. If the information requested for is held by or its subject matter is

closely connected with the function of another public authority, the
PIO shall transfer, within five days, the request to that other public
authority and inform the applicant immediately.

3. PIO, on receipt of a request, shall as expeditiously as possible, and in

any case within thirty days of the receipt of the request, either
provide the information on payment of such fee as may be prescribed
or reject the request for any of the reasons

4. Where the information requested for, concerns the life or liberty of a

person, the same shall be provided within forty-eight hours of the
receipt of the request.
FIRST APPEAL

 Any person who does not receive a decision within the time
specified (normally thirty days) or is aggrieved by a decision of the
Central Public Information Officer may, within thirty days from
the expiry of such period or from the receipt of such decision,
prefer an appeal to the officer who is senior in rank to the
Central Public Information Officer in each public authority.
The appellate authority has the power to condone the delay in
filing the appeal if he is satisfied that the appellant was prevented
by sufficient reasons from filing the appeal in time.

 If the appeal is against the third party information, the appeal by

the concerned third party shall be made within thirty days from the
date of the order.
SECOND APPEAL

A second appeal will lie against the decision of the appellate authority
before the Central Information Commission (or the State
Information Commission) and the same shall have to be preferred
within ninety days from the date on which the decision should have
been made or was actually received.

The appeal shall be disposed of within thirty days of the receipt of

the appeal or within such extended time not exceeding a total of
forty-five days from the date of filing thereof. The decision of the
Central Information Commission is binding on the parties.
 PENALTY

PENALTY IMPOSED
GROUNDS

SECTION 20(1)

-Refusal to receive an application for

information without reasonable cause.
-Information not furnished within the
time limit prescribed under Section
At the rate of Rs. 250 per day till the
7(1).
application is received or information is
-Denied the request for information
furnished.
malafidely.
However, the total amount of penalty
-Knowingly gave incorrect, incomplete,
shall not exceed Rs. 25,000.
or misleading information.
-Destroyed the information requested
by the applicant.
Obstructed in any manner in furnishing
the information
6. Information Technology Act,
2000
Introduction

 The General Assembly of the United Nations by the resolution

A/RES/51/162, dated 30 January, 1997 adopted the Model Law on
Electronic Commerce adopted by the United Nations Commission on
International Trade Law.

 Therefore, the Act facilitated the amendments to Indian Penal Code,

the Indian Evidence Act, 1872, the Bankers’ Books Evidence Act,
1891 and the Reserve Bank of India Act, 1934 and for matters
connected therewith or incidental thereto.

 INVESTIGATION
Chapter XI of the Act lists various offences and how the said offences will
be investigated by the Police Officer not below the rank of Inspector
of Police. These offences include the tampering with computer source
documents, publishing of information, which is obscene in electronic form
and hacking.
PENALTY

shall be liable to pay damages by way of compensation to the

person so affected.”

The chapter also deals with penalties and adjudication for various
offences. The Act provides for appointment of any officers not
below the rank of a director to the Government of India or an
equivalent officer who shall adjudicate whether any person has
made a contravention of any of the provisions of the Act or rules
framed there under.

The said adjudicating officer has been given the powers of a Civil
Court.
APPEAL

(2) The Central Government shall specify, by notification the matters and
places in relation to which the Appellate Tribunal may exercise jurisdiction.
As per Section 57 regarding Appeal to the Appellate Tribunal

“(1) Save as provided in sub-section (2), any person aggrieved by an order

made by controller or an adjudicating officer under this Act may prefer an
appeal to a Appellate Tribunal having jurisdiction in the matter.

(2) No appeal shall lie to the Appellate Tribunal from an order made by an
adjudicating officer with the consent of the parties.

(3) Every appeal under sub-section (1) shall be filed within a period of forty-
five days from the date on which a copy of the order made by the
Controller or the adjudicating officer is received by the person aggrieved and
it shall be in such form and be accompanied by such fee as may be
prescribed:
Provided that the Appellate Tribunal may entertain an appeal after the expiry of the
said period of forty-five days if it is satisfied that there was sufficient cause for not
filing it within that period.

(4) On receipt of an appeal under sub-section (1), the Appellate Tribunal may, after
giving the parties to the appeal, an opportunity of being heard, pass such orders
thereon as it thinks fit, confirming, modifying or setting aside the order appealed
against.

(5) The Appellate Tribunal shall send a copy of every order made by it to the
parties to the appeal and to the concerned Controller or adjudicating officer.

(6) The appeal filed before the Appellate Tribunal under sub-section (1) shall be dealt
with by it as expeditiously as possible and endeavor shall be made by it to dispose of
the appeal finally within six months from the date of receipt of the appeal.”
7. LIMITED LIABILITY
PARTNERSHIP
Salient features of LLP

[Link] is a body corporate

2. Perpetual Succession
3. Separate Legal Entity
4. Mutual Agency
5. LLP Agreement
6. Artificial Legal Person
7. Common Seal
8. Limited Liability
9. Management of Business
10. Minimum and Maximum number of Partners
Conversion into LLP

Conversion from firm into LLP : A firm may convert into a LLP in
accordance with the provisions of this Chapter and the Second
Schedule.

Conversion from private company into LLP : A private company may

convert into a LLP in accordance with the provisions of this Chapter and
the Third Schedule.

Conversion from unlisted public company into LLP : An unlisted

public company may convert into a LLP in accordance with the provisions
of this Chapter and the Fourth Schedule.
8. THE PREVENTION OF
CORRUPTION ACT, 1988
Special Judge

(i) Appointment

Section 3 of the P.C. Act gives powers to the Central and State
Governments to appoint ‘Special Judges’ to try cases under the statute. It
also specifies the offences which may be dealt with by these special judges
and the minimum qualifications which are necessary for their appointment.

“(1) The Central Government or the State Government may, by notification in

the Official Gazette, appoint as many special Judges as may be necessary for
such area or areas or for such case or group of cases as may be specified in
the notification to try the following offences, namely:--
(a) Any offence punishable under this Act; and
(b) Any conspiracy to commit or any attempt to commit or any abetment of
any of the offences specified in clause (a).

(2) A person shall not be qualified for appointment as a special Judge under this
Act unless he is or has been a Sessions Judge or an Additional Sessions
Judge or an Assistant Sessions Judge under the Code of Criminal
Procedure, 1973 (2 of 1974).”
(ii) Cases that may be tried

“(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of

1974), or in any other law for the time being in force, the offences specified in sub-section
(1) of section 3 shall be tried by special Judges only.

(2) Every offence specified in sub-section (1) of section 3 shall be tried by the special Judge
for the area within which it was committed, or, as the case may be, by the special Judge
appointed for the case, or where there are more special Judges than one for such area, by
such one of them as may be specified in this behalf by the Central Government.”
Subsection 3 requires the special judge trying a case under the provisions of the Act to also
take into consideration in the trial any other offence also under “which the accused may,
under the Code of Criminal Procedure, 1973 (2 of 1974), be charged…”

Subsection 4(added in the amendment in 2018) inter-alia requires that the trial of such
offence be held, as far as practicable, on day-to-day basis and an endeavor be made to
ensure that the said trial is concluded within a period of two years. In case the trial
does not reach conclusion within the 2 years stipulated, the judge has to record reasons
for the delay and extend the date for a maximum further period of 6 months at a time
so that ‘the said period together with such extended period shall not exceed ordinarily
four years in aggregate’
Procedure and powers of special Judge.—

(1)A special Judge may take cognizance of offences without the accused
being committed to him for trial and, in trying the accused persons, shall
follow the procedure prescribed by the Code of Criminal
Procedure, 1973 , for the trial of warrant cases by Magistrates.
(3) Save as provided in sub-section (1) or sub-section (2), the provisions of the Code of
Criminal Procedure, 1973 (2 of 1974), shall, so far as they are not inconsistent with this
Act, apply to the proceedings before a special Judge; and for the purposes of the said
provisions, the Court of the special Judge shall be deemed to be a Court of
Session and the person conducting a prosecution before a special Judge shall
be deemed to be a public prosecutor.

(4) In particular and without prejudice to the generality of the provisions contained in
sub-section (3), the provisions of sections 326 and 475 of the Code of Criminal
Procedure, 1973 (2 of 1974), shall, so far as may be, apply to the proceedings
before a special Judge and for the purposes of the said provisions, a special
Judge shall be deemed to be a Magistrate.

(5) A special Judge may pass upon any person convicted by him any sentence
authorised by law for the punishment of the offence of which such person is
convicted.

(6) A special Judge, while trying an offence punishable under this Act, shall exercise
all the powers and functions exercisable by a District Judge under the Criminal
Law Amendment Ordinance, 1944.
Punishments and Offences
Fixing of Fine

According to the section while fixing the fine the court shall take
into consideration the amount or the value of the property, if
any, which the accused person has obtained by committing or
“where the conviction is for an offence referred to in clause (b)]
of sub-section (1) of section 13, the pecuniary resources or
property referred to in that clause for which the accused person is
unable to account satisfactorily.”
Investigation

Section17- Investigation shall be done by a police officer

not below the rank of:

 In the case of Delhi, of an Inspector of Police.

 In metropolitan areas(Bombay,Calcutta,Madras & Ahmedabad
and in any other metropolitan area notified as such under sub-section (1)
of section 8 of the Code of Criminal Procedure, 1973, of an Assistant
Commissioner of Police.
 Elsewhere, a Deputy Superintendent of Police or an
officer of equivalent rank shall investigate any offence
punishable under this Act without the order of a
Metropolitan Magistrate or a magistrate of first class, or
make any arrest therefore without a warrant.
The Authority to examine bankers’ books

Section 18 of the Act stipulates that if the investigation officer

believes that the bankers’ records need to be examined for the
purpose of inquiry, the officer may examine them.

This power of inspection extends beyond the offender’s bank

accounts and includes the authority to search the bank accounts of
anybody whom the officer suspects of holding money on behalf of the
criminal.

No power under this section in relation to the accounts of any person

shall be exercised by a police officer below the rank of a
Superintendent of Police, unless he is specially authorised in this
behalf by a police officer of or above the rank of a Superintendent of
Police
Appeal and Revision

Section 27- Subject to the provisions of this Act, the

High Court may exercise, so far as they may be
applicable, all the powers of appeal and revision conferred
by the Code of Criminal Procedure, 1973 on a High Court
as if the court of the special Judge were a court of Session
trying cases within the local limits of the High Court